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We have applied for a reverse mortgage and previously had a Bed and Breakfast, just a small operation to supplement our income. This was closed at the end of the year due to my husband having a stroke, and I became his caretaker. He is doing better learning to walk again and having therapies to help him. We have worked with this agency for almost a year, and we always get to a certain point where they want more documents, such as proof he had these medical bills, etc. We have been through 2 credit counselors and two appraisals because the time limit dates ran out. This last appraiser was a bear to work with and did not want any advice from us as homeowners, did not ask any questions, and assumed many things that were not correct about the property and have written this up and given it to the agent we are working with and looks like they are going to turn us down due to this information. We have been discriminated against due to this info. She came early on a Monday morning after a weekend of the family being here to help with their dad. I don’t drive, and he can’t be due to being paralyzed right now, so they get us out and about a little and take us out to eat breakfast dishes that were still in the sink. She said I see you cooked breakfast for people this morning, and I said yes, and I apologized that I hadn’t gotten around to them yet because I had to shower my husband and get him ready for a doctor's appointment that we would be going to as soon as you’re finished. She didn’t ask what guests she was referring to, and I could have told her if she had but just assumed and reported that it was an operating Bed and Breakfast. Is there any way?

By Linda on 11.17.2019

Hello Linda,

Every borrower has a right to rebut any information in the appraisal report.  An appraiser is the lender’s and HUD’s eyes and ears in the field. 

They will research property before and after they visit the home. Suppose the appraiser has found current advertising for your closed business that still appears for your address. In that case, (Air BnB or VRBO  type listings still showing for your address), the appraiser is bound by licensing and HUD approval to include that in their report. 

I don’t know what the appraiser specifically said about the presence of dishes, the appearance of a business being run from the premises, or what other documentation (if any) she uncovered.

Still, I would suggest you make sure that any old listings of your residence are canceled, that you no longer have any active licenses (if you ever did), and that you contact your lender and explain the circumstances and request a reconsideration if you do receive a declination and ask what documentation they would accept as evidence that the business no longer operates at that location. 

The trouble is that HUD does not allow the transient rental use of the property, including Bed and Breakfast usage.

If the appraiser has uncovered existing advertising for the property, she would have to report it. Then the lender would have to either obtain satisfactory documentation that the property was no longer being used as such (and had not long before the application) or deny the loan request. 

It is difficult for the lender as this is not a cut-and-dry case like a property that is either proper zoning or it isn’t. 

A property being used in a manner that HUD does not allow can be stopped and then started again after the loan closes, so the lender will want to be sure that the unallowed business use has indeed ceased and is not likely to start back up right after the loan closes and if they cannot reasonably receive that assurance, they may not be willing to close the loan. 

If you do not have the property listed on any services and you have documentation showing that the Air BnB licensing was terminated last year, that would be a powerful argument to make with the lender.


Related: What are the Reverse Mortgage Property Requirements?

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